Thread by @CaVivekkhatri

The government just cut the royalty on crude oil & gas.

48 hours after Modi's gold speech.

The dots only 0.01% will connect 🧵👇

Govt cut oil/gas royalty today. The motive?

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1/ On May 12, 2026 - Ministry of Petroleum quietly notified:

→ Deep-water royalty CUT to 5% (first 7 years)
→ Ultra-deep-water royalty CUT to 0% (first 7 years)
→ Shallow water cut to 7.5% (HELP/DSF)
→ From year 8: only 5-10% (vs ~12.5%)

Filed under "boost domestic output."

Translation: emergency oil sourcing has begun.

2/ The timing is everything.

Day 0 (May 10): Modi tells Indians "stop buying gold, save forex."
Day 1 (May 11): Markets crash. INR breaks 95.18. Brent hits $106.
Day 2 (May 12): Govt slashes royalty on oil & gas EXTRACTION.

This isn't policy reform.
This is a sovereign reaching for every domestic barrel it can find.

Coincidence? In policy-making, never.

3/ The math behind WHY this is desperate:

→ India imports 88.2% of crude (FY25)
→ Imports ~50% of natural gas
→ FY26 oil import bill: $174.9 BILLION (22% of total imports)
→ Domestic crude production FY25: only 28.7 MMT
→ Domestic gas production: 35,594 MMSCM

Every barrel found at home = 1 less paid in dollars.

The royalty cut = a $20-30B forex savings bet over 7-10 years.

4/ The instant WINNERS - upstream players:

🟢 ONGC
→ India's largest deep-water player
→ KG-DWN-98/2 block direct beneficiary
→ Q3 FY26 PAT already up 22% YoY
→ Higher post-royalty realisations = pure EBITDA expansion

🟢 OIL INDIA
→ Northeast onshore + offshore exposure
→ Margin tailwind on every fresh barrel

🟢 RELIANCE INDUSTRIES (RIL)
→ KG D-6 ultra-deepwater block = ZERO royalty for 7 years
→ Massive cash-flow upgrade hidden in plain sight

CLSA's bull case on ONGC: +65% from ₹270.
This is the catalyst.

5/ The SECOND-ORDER winners - oilfield services:

When upstream gets royalty relief, they SPEND on exploration.

Watch:
→ Aban Offshore (offshore rigs)
→ Jindal Drilling
→ Selan Exploration
→ Deep Industries (deep-water specialists)
→ Asian Energy Services

These are the picks-and-shovels of an oil-rush.

Nobody is pricing the order-book inflation coming next 12-18 months.

This is where 5-10x multibagger setups historically come from.

6/ The PARADOX nobody is explaining:

OMCs (IOC, BPCL, HPCL) are bleeding ₹1,600-1,700 cr/DAY.

Already lost ₹1 lakh crore in 10 weeks.

A royalty cut for upstream does NOTHING for OMCs.

Why? Because OMCs IMPORT crude, they don't extract it.

Stocks reacted accordingly:
→ IOC: -2.45%
→ BPCL: -2.34%
→ HPCL: -2.65%
→ RIL: -1.23%

The Govt picked a side.

Upstream gets a gift. Downstream gets to bleed.

7/ The HISTORICAL echo:

In 2013, govt also slashed exploration terms during the BoP crisis.
In 2014, NELP was relaxed.
In 2017, HELP was launched (revenue-sharing model).

Every major Indian oil-policy reform has come during a forex emergency.

This is the 4th such reform in 13 years.

Pattern recognition:
Crisis → Royalty/policy relief → Upstream multi-year boom.

ONGC, RIL gains from 2013-2017 cycle: 80-150%.

8/ What's HIDDEN in the fine print:

→ Coal Bed Methane (CBM) blocks also get relief
→ Discovered Small Field (DSF) policy revised
→ Pre-NELP blocks (legacy nominated to PSUs) re-benchmarked
→ Casing head condensate (high-value byproduct) gets new royalty schedule

Translation: EVERY corner of India's oil & gas chain just got fiscal oxygen.

This isn't a tweak.

This is a structural regime change- engineered in 48 hours.

Best play on royalty cut over next 6 months?

9/ The HIDDEN MEGASTORY: KG-D6 basin.

Reliance's KG-D6 block is classified as ULTRA-DEEPWATER.

Under the new rules:
→ Royalty = 0% for first 7 years
→ 5% from year 8

What this means in numbers:
Current KG-D6 gas output: ~28 mmscmd
At current gas price ~$8/mmbtu = ~$1.5B annual revenue
Royalty saved over 7 years: $500M+ per discovery

RIL's gas vertical just got a SILENT re-rating trigger.

Analysts haven't built this in yet.

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10/ The GEOPOLITICAL layer most miss:

India imports ~45% of its crude through the Strait of Hormuz.

Strait status:
→ Effectively shut since Feb 28, 2026
→ Traffic at 5% of pre-war levels
→ April 2026 vessels: 191 (vs 3,000 normal)

Govt issued a Natural Gas Control Order on March 9, 2026 under Essential Commodities Act.

Royalty cut = NATIONAL SECURITY response.

When the import pipe is choked, you incentivize what's underneath your feet.

This isn't a market reform.
This is energy sovereignty in panic mode.

11/ CONNECT THE DOTS - 48 hours of policy:

→ Modi: stop buying gold (DEMAND side)
→ Modi: cut fuel use (DEMAND side)
→ Royalty cut: boost domestic oil (SUPPLY side)
→ Gas Control Order: prioritise PNG/CNG (RATIONING)
→ Crude reserves emergency build-up (March 2026)
→ LPG production +25% via diversion (March 2026)

This is a COORDINATED forex defense package.

Demand compression + supply expansion + rationing + reserves.

Textbook crisis management.

If only the public knew this is what's happening.

12/ The SECTOR ROTATION playbook now:

🟢 BUY ZONE (upstream + oilfield services):
→ ONGC
→ Oil India
→ RIL (KG-D6 angle)
→ Aban Offshore, Selan, Deep Industries
→ Hindustan Oil Exploration (HOEC)

🔴 AVOID ZONE (downstream OMCs):
→ IOC, BPCL, HPCL - bleeding ₹1L cr in 10 weeks
→ Mahanagar Gas, IGL (CGD price risk)
→ Castrol India (input cost squeeze)

🟡 NEUTRAL (refining-led):
→ Chennai Petroleum
→ Mangalore Refinery (MRPL)

A regime change ALWAYS rotates capital.

Macro educational view. Not investment advice.

13/ WHAT'S COMING in the next 60 days:

→ OALP-X (10th round of oil block auctions) - fresh impetus likely
→ Strategic Petroleum Reserve (SPR) Phase 3 -accelerated build-out
→ Possible windfall tax reduction (to free upstream cash)
→ Cess restructuring on crude (₹4,500/tonne to be revisited)
→ Gas price ceiling review (Oct 2025 - Mar 2026 ceiling expires)
→ City Gas Distribution (CGD) reform - pricing freedom

If 3+ of these land = the royalty cut was just Page 1.

You are watching India's biggest oil-policy regime change in 20 years.

Live.

14/ The UNDER-THE-RADAR play 99% will miss:

GAS infrastructure plays.

Why? Because:
→ Domestic gas production is government priority #1
→ City Gas Distribution (CGD) gets supply assurance
→ LNG terminals + regas + pipeline = bottleneck plays
→ Petronet LNG, GAIL, GSPL = silent infrastructure beneficiaries

When royalty drops, exploration rises.
When exploration rises, pipeline/transport demand surges.

This is the infrastructure layer of the oil rush.

Watch IGL, MGL on the demand side - they get squeezed.
Watch GAIL, Petronet on the supply side - they get bid up.

Will India's domestic oil output rise 25%+ in 5 years?

15/ The uncomfortable truth in one frame:

→ Modi spoke May 10 → forex crisis acknowledged
→ Markets crashed May 11 → repricing began
→ Royalty cut May 12 → supply-side response activated

48 hours. 3 events. ONE coordinated playbook.

The Govt is doing what 1991 forced upon India.
But this time, in slow motion. Pre-emptively.

If you understood the gold thread, this is Page 2 of the same story.

Page 3 is coming. Bookmark this. Revisit in 30 days.

Read this Thread as well:

PM Modi just asked 1.4 billion Indians to STOP buying gold for 1 year.

Why did he say it - only 0.01% understand.

Let's connect the dots 🧵👇

You just learned something 99% of your timeline hasn't. Fix that.

🔁 Repost the first tweet.

+ Follow @CaVivekkhatri

Bookmark for Future Study!

If you learn something, repost and like the thread.

Radhe Radhe!!